Autumn Budget 2017: Will the Chancellor go out in a blaze of glory?

Faced with mounting electoral, political and fiscal challenges – and the prospect of a looming Cabinet reshuffle – this will be a Budget delivered by a Chancellor under pressure. So how will he react and what exactly can we expect in the red box?

‘Even without Brexit, the UK tax system is at a crossroads. With the tax base shrinking, the question as to who should pay how much tax on what is more important than ever before.

‘Reforming the tax system will require a major public debate and a considerable amount of Parliamentary time. But with Brexit dominating the Parliamentary programme, time is one thing the Chancellor does not have.

‘However, with the need to restore voter confidence, to reflect the fiscal and economic needs of the UK and to impart a sense of control and order to a government which is perceived to be riven by divisions, there is a growing expectation that the Chancellor will deliver a big, bold Budget.

‘With significant investment continuing in the South West, together with increasing international trade in the region, there may be a risk that the Budget measures could potentially curtail growth, especially against the backdrop of the uncertainty of Brexit. As a result, businesses will want to pay close attention to what’s announced.

‘If the Chancellor does feel this is his last Budget, might he decide to go out in a blaze of glory? On Wednesday, we’ll find out.’

RSM is predicting that the highlights may include:

An overall increase in taxes

Restrictions on cherished tax reliefs

New anti-avoidance measures following the ‘Paradise Papers’

First steps to reform VAT

An indication of the direction of travel for future workplace tax and NIC changes following the Taylor review

More resources for HMRC to tackle tax evasion.

Personal Tax

It is unlikely that there will be many giveaways other than perhaps for first time buyers in England and Wales who will be hoping for a reduction in Stamp Duty Land Tax.

More likely will be restrictions to some tax reliefs, including on pension contributions and Enterprise Investment Schemes.

Following the release of the Paradise Papers, we can perhaps expect further anti-avoidance measures to address perceived abuse by the wealthy and internationally mobile.

The Government is already committed to two further increases to the level of personal allowances by 2020 so we are not expecting any new announcements about the personal allowance in this Budget.

Businesses

The UK is already committed to a low corporation tax rate of 17 per cent in the future. With growth prospects uncertain, any change to rates will be unlikely, at least for now. However, the chancellor will be keeping a close eye on corporate tax reductions in the US which may force his hand in the future.

We could however see some reform of well-established tax reliefs such as capital allowances or R&D tax credits. Both are generous and could feasibly be cut back.

One area to watch closely will be VAT. A recent report from the Office of Tax Simplification proposed changes to the VAT registration threshold. The UK’s VAT registration threshold is £85K per year, the highest in Europe. One proposal is to decrease this to £20K, which would have a huge impact on small businesses, increase prices to end users and bring more businesses into the Making Tax Digital reporting regime earlier than planned.

We are also likely to see more funding for HMRC to continue its fight against businesses that evade taxes.

Employers

Employers need to keep a close eye on this Budget for clues as to how the Government will respond to recent decisions in the cases such as Uber and Deliveroo and Matthew Taylor’s review into the 21st century workplace. This was a wide-ranging review into modern working arrangements which highlighted the major problem of the mismatch between tax law and employment law. How the government reacts to this important report will potentially have huge implications on the national insurance contributions paid by employers, employees and the self-employed.

Written by Weaf

WEAF are the leading networking association for aerospace and defence companies in the South West of England. Our mission is to strengthen an aerospace and defence community that fosters innovation and collaboration, and provides a platform for growth.

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